Puffery and the Misstatement That Wasn’t

To assert a fraud claim, a plaintiff must allege “a
misrepresentation or a material omission of fact which was false and known to
be false by defendant, made for the purpose of inducing the other party to rely
upon it, justifiable reliance of the other party on the misrepresentation or
material omission, and injury.” Mandarin Trading Ltd. v. Wildenstein, 16
N.Y.3d 173, 178 (2011) (internal quotation marks and citation omitted); Lama
Holding Co. v Smith Barney, 88 N.Y.2d 413, 421 (1996).

On October 25, 2019, Judge William H. Pauley III addressed
the foregoing principles in The Hertz Corp. v. Accenture LLP, 19-cv-3508
(S.D.N.Y. Oct. 25, 2019) (here),
wherein he dismissed a claim for violations of the Florida Deceptive and Unfair
Trade Practices Act (“FDUTPA”) because the challenged statements, which the
Court held sounded in fraud, were mere puffery or too vague to be actionable.

The Hertz Corp. v. Accenture LLP

Background

In 2016, Hertz decided to undergo a digital makeover by
developing a new website and a suite of mobile applications for its vehicle
rental brands (the “Project”). Since Hertz did not have the necessary
expertise, it solicited proposals from technology service firms, including
Accenture. Ultimately, Hertz hired Accenture following a one-day marketing
presentation in which Accenture touted its expertise in website and mobile
application development. The presentation contained slides stating that Accenture’s
staff consisted of “800 [e]xperts” who comprised “[t]he best talent in the
world.” The presentation also stated “[w]e’ve got the skills you need to win”
and that Accenture would “put the right team on the ground [from] day one.”

The Project was to be conducted in phases, and the services
and deliverables for each phase were, in turn, specified in letters of intent
(“LOIs”) and corresponding statements of work (“SOWs”). The LOIs and SOWs were
governed by a Consulting Services Agreement between Hertz and Accenture that
had been in place since 2004.

Between August and November 2016, Accenture completed work
on Phase 1, which involved various planning services and the development of a
“Solution Blueprint” describing the processes and technologies needed to
complete the Project. On January 30, 2017, Accenture and Hertz entered Phase 2
of the Project pursuant to an LOI that required Accenture to design, build,
test, and deploy the website and mobile applications. Accenture committed to a
December 2017 “go-live” date.

Phase 2, however, was plagued with difficulties. By
September 2017, Accenture informed Hertz that it would not be able to meet the
promised December 2017 go-live date and requested an extension until January
2018. Accenture later requested a second extension until April 2018. Hertz
alleged that many of Accenture’s problems in completing the Project were
related to Accenture’s misrepresentations about the expertise of its staff.

Hertz contended that Accenture’s developers were not experts
as promised. Instead, they were inexperienced and unfamiliar with the
technologies that Accenture recommended to Hertz for the Project. This
inexperience, claimed Hertz, manifested itself in Accenture’s poor website and
mobile application coding.

Hertz further alleged that Accenture struggled to implement its
“RAPID” technology, which was intended to streamline the development of
portions of Hertz’s new website. Accenture recommended the RAPID technology,
explaining that its implementation required expertise which Accenture’s
developers possessed. Based upon the foregoing, Hertz acquired licenses for the
technology. Ultimately, however, according to Hertz, Accenture failed to
implement RAPID, and it later acknowledged that it “spent a good deal of time”
trying to “fight[] through [the] integration of RAPID” into the Project.

Thereafter, Hertz hired a new technology services provider
for the Project in June 2018 and terminated Accenture’s services. After Hertz
removed Accenture from the Project, Hertz allegedly learned that Accenture had
misrepresented the extent of its code testing.

In total, Hertz paid Accenture over $32 million in fees and
expenses during the Project.

Hertz filed suit alleging, inter alia, that Accenture
violated the FDUTPA. In that regard, Hertz alleged that Accenture made two
categories of misrepresentations: (1) misstatements contained in the 2016
marketing presentation; and (2) misstatements concerning Accenture’s expertise
with RAPID technology and the extent of its code testing. Accenture moved to
dismiss the FDUTPA claims on the grounds that they failed to state a
claim. Specifically, Accenture argued
that the alleged misstatements in the first category (i.e.,
misstatements contained in the 2016 marketing presentation) were not actionable
as they were mere puffery, and the misstatements in the second category (i.e.,
misstatements concerning Accenture’s expertise with RAPID technology and the
extent of its code testing) failed to satisfy the heightened pleading
requirements of Rule 9(b). The Court agreed with Accenture and dismissed the
FDUTPA claims.

The Court’s Decision

Hertz contended that, within the 2016 marketing
presentation, Accenture falsely represented that its staff consisted of “800
[e]xperts” amounting to “[t]he best talent in the world” and that Accenture would “put the right team on the ground [on] day one” – a team that Accenture represented possessed “the skills you need to win”.

Hertz averred that Accenture’s personnel were not experts. According
to Hertz, most of Accenture’s developers were junior, inexperienced, and
located offshore. Accenture claimed that, although the alleged misstatements satisfied
the heightened pleading requirements of Fed. R. Civ. P. 9(b), they were
nevertheless deficient because they were non-actionable puffery.

Judge Pauley held that Accenture’s representation that it
housed “800 [e]xperts” amounting to “[t]he best talent in the world,” along
with its promise that it had “the skills you need to win” and would “put the
right team on the ground [on] day one,” were “quintessential examples of
puffery.” Slip Op. at 9. Such statements, noted the Court, were “analogous to
statements that courts within [Second C]ircuit have routinely dismissed as
non-actionable puffery, albeit in non-FDUTPA cases.” Slip Op. at 8 (citations
omitted).

The Court rejected Hertz’s reliance on two Florida cases in
which the courts held the puffery to be actionable. In the first one, the
statements involved consumer goods (e.g., beer and dish soap) that were
purchased by ordinary shoppers who could consider them to be “more than just a
salesman’s lavish claims” (Thompson, 2018 WL 5113052, at *2), and in the
second one, the statements were part of a larger marketing campaign and
packaging (Marty v. Anheuser-Busch Cos., 43 F. Supp. 3d 1333, 1342 (S.D.
Fla. 2014)). The Court observed that Hertz did not resemble the plaintiffs in Thompson and Marty because it is a sophisticated, multi-billion-dollar company,
which had a long-standing relationship with Accenture dating back to 2004. Slip
Op. at 9.

Accordingly, the Court concluded that the alleged
misstatements in the marketing presentation were not actionable.

Judge Pauley also held that Hertz failed to satisfy the heightened pleading requirements of Fed. R. Civ. P. with respect to Hertz’s claim that Accenture falsely represented its RAPID expertise and the extent of its website and mobile application code testing. Slip Op. at 9-10. The Court noted that the claim rested “on a single, vague accusation that ‘Accenture falsely led Hertz to understand that its developers had the required expertise to use RAPID properly.’” Id. at 10, citing the Complaint. “This conclusory allegation,” held the Court, “cannot satisfy Rule 9(b), as the Complaint fail[ed] to explain how or when Accenture led Hertz to develop that understanding.” Id. (citation omitted). Under Rule 9(b), a plaintiff must (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent. Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (quotation marks omitted). In other words, the plaintiff must “set forth the who, what, when, where and how of the alleged fraud.” U.S. ex rel. Resnick v. Weill Med. Coll. of Cornell Univ., 2010 WL 476707, at *4 (S.D.N.Y. Jan. 21, 2010) (quotation marks omitted).

The Court explained that although Hertz discussed Accenture’s
recommendation that Hertz use RAPID for the Project, it failed to plead more – i.e.,
the who, what, when, where and how of the alleged fraud. “[A]s Accenture notes,”
said Judge Pauley, “the mere fact that Accenture recommended RAPID to Hertz [did]
not support Hertz’s assertion that Accenture misrepresented its expertise.”
Slip Op. at 10.

Judge Pauley deemed Hertz’s allegations concerning
Accenture’s code testing to be “likewise insufficient.” Id. In this
regard, the Court noted that Hertz failed to identify any misstatement, stating
that “[t]he Complaint baldly assert[ed] that ‘Accenture’s developers . . .
misrepresented the extent of their testing of the code’” without specifying “what
Accenture represented about its code testing in the first place.” Id.

Hertz shows that regardless of the circumstance, a
plaintiff alleging fraud must plead the claim with particularity.

Hertz also reminds litigators that mere puffery will
not suffice to state a claim for relief. More is needed. The plaintiff must come
forward with statements that are objectively verifiable.

Finally, Hertz teaches that if a litigant is going to
allege fraud, he/she must identify the statement or omission alleged to be
false. Vague assertions about a fact or circumstance will not suffice to withstand
a motion to dismiss.

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